A draft constitutional amendment for South Dakota that legally enforces the Gross Receipts Tax (GRT) system while eliminating property taxes and preventing government overreach.
Proposed Constitutional Amendment
To Replace Property Tax with a Capped Gross Receipts Tax in South Dakota
Section 1: Permanent Elimination of Property Tax
(a) The state of South Dakota, its counties, municipalities, and any other local government entities shall not levy any tax on real property, including land and structures thereon, for the purposes of revenue collection.
(b) Any and all property taxes currently in existence within the state shall be fully phased out within a period not exceeding five (5) years from the ratification of this amendment.
(c) Once eliminated, property tax shall not be reinstated except through a constitutional amendment requiring ⅔ legislative approval and majority voter approval in a general election.
Section 2: Implementation of a Gross Receipts Tax (GRT)
(a) To replace property tax revenue, the state shall establish a Gross Receipts Tax (GRT) on business transactions. The rate of such tax shall not exceed 2.5% of gross business revenue.
(b) The GRT shall be phased in over a period of no more than five (5) years, with property taxes simultaneously phased out.
(c) No increase beyond 2.5% shall be permitted without a statewide voter referendum. Any proposed increase shall:
- Require ⅔ approval of both legislative chambers.
- Be placed on a general election ballot for public approval.
- Include a sunset clause specifying an expiration date not exceeding five (5) years unless re-approved by voters.
Section 3: Use of GRT Revenue & Spending Restrictions
(a) 100% of GRT revenue must be allocated solely to functions previously funded by property taxes, including:
- 60% for public education (K-12 and community colleges).
- 30% for county and municipal services (police, fire, roads, public safety).
- 10% for infrastructure maintenance and public utilities.
(b) The state and local governments shall not use GRT revenue for new government programs.
(c) If annual GRT revenue exceeds property tax replacement needs by more than 5%, the excess shall be:
- Automatically applied to lower the GRT rate for the following fiscal year, OR
- Rebated to South Dakota residents in the form of tax credits or direct payments.
Section 4: Exemptions & Protections for Residents & Businesses
(a) The following exemptions shall apply to the GRT:
- Small Business Exemption: Businesses earning less than $100,000 annually shall be exempt from paying GRT.
- Essential Goods & Services Exemption: Groceries, prescription medications, and healthcare services shall not be taxed.
- Utility Protection: GRT on electricity, water, heating, and waste disposal shall not exceed 1%.
- Agricultural Protection: Farmers shall be taxed only on final sales, not supplies or equipment. Farm-to-consumer sales shall be exempt up to $250,000 per year.
Section 5: Oversight, Transparency, and Citizen Protections
(a) Annual Public Review: A full financial report detailing GRT revenue collection and expenditures shall be published annually, accessible to all South Dakota residents.
(b) Independent Citizen Oversight Committee:
- A non-governmental watchdog committee shall be formed to ensure compliance with this amendment.
- Members shall be South Dakota residents unaffiliated with state or local government offices, lobbying groups, or political action committees.
(c) Mandatory Sunset Review: Every ten (10) years, the legislature must review the GRT system for effectiveness and fairness. This review shall not permit rate increases outside the limitations in Section 2.
Section 6: Legal Enforcement & No Loopholes
(a) Any attempt to reinstate property taxes in any form, including through fees, assessments, or disguised levies, shall be void and unenforceable under this Constitution.
(b) Any government official or agency that attempts to circumvent these provisions shall be subject to legal action, including personal liability for violating constitutional tax protections.
Effective Date & Ratification
This amendment shall take effect on January 1 of the fiscal year following its ratification by the voters of South Dakota. A transition period of no more than five (5) years shall be permitted for full implementation.
Final Summary
✅ Property tax is permanently eliminated.
✅ GRT is capped at 2.5%, with strict limits on increases.
✅ Revenue is locked into replacing property tax only.
✅ No new government programs can be funded with GRT.
✅ Exemptions protect small businesses, farmers, and essential services.
✅ Oversight ensures transparency and prevents corruption.
This constitutional amendment ensures that South Dakotans never lose their homes due to unpaid property taxes, while maintaining necessary public services without excessive taxation.